I do not believe in emergency funds.

"It will never happen to me."

What if it should happen one day?

Then, die lah.

OK lor.





Reader:
Don't believe in emergency funds. Better to put money in bank preference shares or perpetuals.

AK:
Well, let's hope you never meet with an emergency which might force you to liquidate your investments at prices not of your own choosing.

Reader:
DBS preference share, at any price, still provides a return many times that of a FD. In a situation where the preference shares cannot maintain a payout, is the FD much safer?

While it sounds logical, how often do people who actually set aside an emergency fund found it useful?

Having an emergency fund in a FD is a big opportunity cost.






AK:
I think you could say that you don't have an emergency fund but to say that you don't believe in having an emergency fund boggles the mind.

It might be a good idea to remind ourselves of the GFC and how stock prices plunged terribly. The stock market was, then, in the doldrums for many, many months. 

Many people also lost their jobs.

Imagine someone without an emergency fund who might have an emergency in those months.

Imagine him liquidating his investments at a massive loss only to see the recovery in the stock market later on. Not a pretty thought.






Similar to buying insurance and how we hope we never have to make a claim, we hope that we do not have to draw on our emergency fund.

Similar to buying insurance, there is a cost involved in maintaining an emergency fund.

Should we say we do not believe in having insurance and money paid for insurance is wasted?

"I would rather see you have money you can get at than to worry about the interest rate." 
- Suze Orman

Related posts:
1. Fixed deposits for emergency fund.
2. PMET took 30% pay cut but thankful."... as I have more than 6 months of emergency funds, I was quite relax about this and could take my time to look for a job." 

SingPost posts sinking dividends.

Reader:
I am a sad shareholder of Singpost. Final dividend is 0.5 cent. Should I continue to hold and wait for improvement?

Suspicious looking package at 

Singapore Post mail processing centre.

AK:
Those who thought they would continue to get 7c a year were delusional. I also said those who were expecting a reduced dividend per share (DPS) of 4.2c to 5.6c a year could be disappointed.

Now, we could see an annual DPS of only 2c. If you are still expecting a 5% dividend yield, it is quite depressing.

In my earlier blog on SingPost where I wondered what price I might pay to be a shareholder, I made some assumptions which gave me what I thought was a more realistic DPS of 3c.

A more than 70% reduction in DPS from 7c to 2c is a tough one to swallow for any investor for income. Imagine a retiree who has SingPost as his largest investment in his portfolio.

How much do I think is a fair price to pay for SingPost now? 

You might want to read the related post below for an idea.

Related post:
An incomplete analysis of SingPost.
"Since SingPost is going to pay at least 60% of earnings as dividend, we would get a 3% yield at $1.00 a share, using the assumption in this blog which gives us a DPS of about 3c."